China’s Myth-Busting Miracle

On the 40th anniversary of China's great "opening up" under Deng Xiaoping, its leaders deserve praise for lifting hundreds of millions of people out of poverty and surpassing the United States as the world's largest economy. But China's experience has also dispelled three myths about the impact of economic growth.

PARIS – Forty years ago, on December 29, 1978, the 11th Central Committee of the Communist Party of China released the official communiqué from its third plenary session, launching the greatest economic-growth experiment in human history. In newspeak understandable to CPC insiders, the country’s leaders, channeling the wishes of Deng Xiaoping, announced a series of unprecedented “modernizations” that would transform one of the world’s least developed countries into a leading economic power.

In 2014, China overtook the United States as the world’s largest economy (based on purchasing power parity). Its per capita GDP, 40 times lower than that of the United States in 1980, has grown by a factor of 58, and is now just 3.4 times lower (according to IMF data). In effect, around 15% of humanity has experienced 10% average income growth every year for four decades.

But China’s dizzying rise has also dispelled three leading myths about the impact of economic growth. The first is that growth reduces inequality and increases happiness. In 1955, the economist Simon Kuznets hypothesized that income inequality would increase sharply and then decline – in the pattern of an inverted “U” or a bell – as countries underwent economic development. Given the pace of China’s economic growth since 1978, its experience refutes this claim more powerfully than any other case.

China, after all, is now one of the world’s most unequal countries. For the last ten years, its Gini coefficient has hovered around 0.5, up from around 0.3 in 1980 (a coefficient of 1 means a single individual owns everything). In fact, the relationship between growth and inequality over time has followed a peculiar pattern: China’s Gini coefficient has increased with growth, and decreased when growth has slowed.

Moreover, according to data from the World Inequality Database, the share of China’s national income accruing to the richest 10% increased from 27% to 41% between 1978 and 2015, and doubled for the top 1%. At the same time, the share of national income going to the poorest 50% fell from 26% to 14%. These data are consistent with other sources showing that while per capita GDP grew by a factor of 14 between 1990 and 2010, the top quintile’s share of national income increased at the expense of the bottom four.

To be sure, these are relative inequalities, and China has undeniably reduced absolute poverty. Most Chinese once lived under conditions of high equality and high misery; today, they live in an unequal society where the income of the poorest 10% grew by almost 65% between 1980 and 2015.

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Given such progress, one might think the Chinese have also grown happier. But the opposite seems to be true. In a chapter for the 2017 World Happiness Report, Richard A. Easterlin, Fei Wang, and Shun Wang make a convincing case that while China’s GDP has skyrocketed, its citizens’ reported subjective wellbeing has declined, especially among poorer and older cohorts. Even more surprising, though Chinese subjective wellbeing remains below its 1990 level, it actually ticked up over the past decade, when growth was slower than in the 1990-2005 period.

The second myth dispelled by China’s rapid growth is that economic liberalism eventually breeds political liberalism.Recall that in 1989, just months before Western liberal democracy appeared to have triumphed over Soviet communism, China crushed a student revolt in Tiananmen Square, killing some 10,000 of its own citizens. Since then, the country’s political trajectory has not changed. If anything, the Chinese state’s arbitrary and unfair exercise of power has become much more efficient.

Capitalism with Chinese characteristics implies the presence of a strong state in all areas of national life. While the technocracy facilitates economic expansion, the state’s massive security apparatus muzzles civil liberties and political rights. Rather than becoming more democratic, China became a pioneer of the kind of authoritarian neoliberalism now seen in Turkey, Brazil, Hungary, India, and elsewhere.

Lastly, economic growth can no longer be defended as the best environmental policy. In 2007, then-Premier Wen Jiabao famously described China’s development model as “unstable, unbalanced, uncoordinated, and unsustainable,” owing not least to its deleterious ecological impact. Still, the hope was always that economic growth would follow an “environmental Kuznets curve,” thus preventing or at least mitigating a full-scale disaster. It has not.

Recent data show that China is now the largest extractor of natural resources in a global economy that is becoming ever more resource-intensive. In 2010, China represented 14% of global GDP, but consumed 17% of all biomass, 29% of fossil fuels, and 44% of metal ores. Its domestic consumption of all natural resources now accounts for one-third of the global total, compared to just one-quarter for all developed countries.

Moreover, China now contributes 28% of global carbon-dioxide emissions – twice as much as the US, three times more than the European Union, and four times more than India. Between 1978 and 2016, China’s annual CO2 emissions grew from 1.5 billion tons to ten billion tons, and from 1.8 tons to 7.2 tons in per capita terms, compared to the world average of 4.2 tons.

At the CPC’s 19th National Congress in October 2017, Chinese President Xi Jinping spoke of a fundamental “contradiction between unbalanced and inadequate development and the people’s ever-growing needs for a better life.” China, he confirmed, was committed to the transition to “ecological civilization” begun by the 13th Five-Year Plan in 2016. Apparently, the greatest episode of economic growth in human history has ended.

I surmise that Prof. Laurent would not have gone to the lenghth of citing Chinese cases to tell that economic growth has failed to bring equality or more equality in wealth, prosperity, wellbeing, happiness, etc.

As for "Chinese" persistant failures in achieving civic liberty and democracy, I think it is more the Western failure in prognostication than China's. The Western failure comes from the conception, which is kind of Hegelian, that Western history represents the true, universal flow of history."In the long course of Chinese history there have been only two revolutions which have radically altered the political and social structure of the state," said C. P. Fitzgerald, meaning one in 221 B.C. and one in 1911. In 221 B.C. the first Chinese empire was built, setting the political pattern of how Chinese society could be politically put together and ruled withoug its falling apart. The CCP is simply following the sociologically inescapable tradition.The revolution of 1911 was not revolutionary at all in that it did not make China democratic. But it might have been revolutionary in the sense that China could no longer exist on its own and encased in its own world withoug intercourse with the outside.

China was not one of the world's least developed countries in 1978. Mao and the CCP had shattered and devastated Chinese society and economy by 1978, and Deng Xiaoping had to restart from the artificially made bottom.It is not known in China and in the world at large because of China's international propaganda and as the CCP has covered it up and Chinese school does not teach it, that China's modernization effort started wiht the defeat in the Sino-Japanese War of 1894~95, not with the defeat in the Opium War of 1840~42. Japan sent young people to the West to learn. China sent them to Japan. Deng's economic opening-up policy most heavily depended on technology transfer, grants and low-interest loans from Japan.Don't believe the China's usual big lies about Japan like "Japanese killed three hundred thousand Chinese in Nanjing City."

Unfortunately, this article is filled with bias. For instance, to say that "the situation of the poorest is up by 65%" simply means that – "65% more of nothing is still nothing."

The Communist Chinese Government has the unique power to dictate to the largest labor-force on Earth where its people must live, what they must do, and what pittance they shall be paid for it. Said government pays no attention to environmental restrictions and has essentially no labor laws. Western manufacturers are all too happy to displace their own work-force in quest of "We Sell For Less, Always.™" And this is the -entire- reason why China is said to have "a booming economy."

But – it will not last. What happened long ago in "a regular parallelogram with right-angle sides" – possibly a futile effort to avoid Chinese automatic censors – was not an aberration: it is China's future. The Government which now holds absolute sway in that ancient country is merely a "blip" in its ancient history. The "economic miracle" which is glowingly described in this piece of puffery is un-sustainable.

The article was not so bad up to this point. If China is "nominally" communist, and in reality "capitalist with chinese characteristics", then the ones that believe that capitalism is the key driver of enviromental destruction are not wrong.

All countries in the world contribute pollution and destruction to the world environment! According to the World Natural Resources and Sustainability report: the Western countries in particular the US and EU have extracted much more natural resources in the name of development. Now China is just repeating what US and EU have done to the world over the years in order to "feed" the population.

With almost 18% of the world population, the argument on CO2 contribution factor is full of flaws! - 2x more CO2 than US (with only 4% of the world population) and - 3x more than EU (with less than 10% of the world population)

Economic views, facts, reports, statistics and arguments are hardly impartial or unbiased in nature. Beings are filled with greed at the end we can only agree to disagree!

This article is a welcome aggregation of data on three busted myths. It also sheds light on what the neoliberalism brought on by Deng, Thatcher and Reagan meant. In an open economy without income redistribution the most aggressive people will be able to take far more for themselves, leading to rising inequality. It is no secret that environmental destruction comes from aggressively dominating the environment.

The more cooperative (communistic) people who do not "want it all" fall behind and as their world of moderation and social sharing disappears, they become less happy. If a strong government takes general human well-being as its goal, as found in North Europe, a protected environment can be created for the less aggressive and voracious people (housing, health and education at a moderate level). If government cedes power to private control, the aggressive simply drive the communally-minded into poverty, like the Western Hemisphere, currently excluding Canada.

When discussing China, it should be remembered that China is not governed by a "communist" party. The party that runs China has the name "Gòngchǎndǎng" (共产党) or "National Production Party" - which should not be translated as "communist". Labour movements are just as unpopular with the government in China as they are in the United States. There is no reason to expect either equality or tranquility from the majority of the people who do not "want it all" but want to live and let live.

"China, after all, is now one of the world’s most unequal countries. For the last ten years, its Gini coefficient has hovered around 0.5"?

Hardly.

First off, GINI is a measure of income inequality and so overlooks the fact that 97% of poor Chinese own their homes.

Second, the information is outdated. Much of China’s GINI (inequality) gap is structural: their inland, rural populations have always been poorer than their urban, coastal cousins and, because the country couldn’t afford to build homes or cities fast enough, inlanders were held in place by residential hukous. Recently, however, economists[1] found that this aspect of inequality has been exaggerated because the cost of living in wealthy areas like Beijing, Shanghai and Shenzhen is much greater since urban land prices–not housing quality–are vastly higher. If we include the full range of goods and services whose price differ across areas (in rural areas basic foods cost half of Beijinbg’s prices), incomes from most rural areas should be multiplied by fifty percent to make them comparable.

If we adjust for where people actually live the difference shrinks even further. Until recently, demographers counted people’s hukous–where they were registered to live rather than where they actually lived–but, migrant workers’ numbers rose to three hundred million in 2018, distorting the comparisons. In real life, the coastal provinces have millions more residents than their registered population and the reverse holds for migrant-sending inland provinces, so measures of inequality rose as each person moved from China’s interior to the coast because the migrant contributed to income in the coastal destination but was still counted as living in the origin, interior, area. Once this counting error is corrected, regional inequality in China is found to have declined at an average trend rate of 1.1 percent per year from 1978 to 2016. By 2002, fourteen Guizhou workers earned as much as an average[2] Shanghainese and by 2019 it took five. Nor was the structural gap as painful as it sounds: as far as everyone could see, everyone got richer every year. Villagers buying their first pickup truck found Shanghai lifestyles uninteresting because even at the bottom, things improved steadily.

The USA did export polluting industries to China to increase the wealth of western democracies but the gambit failed. They thought China's governance would collapse but China's CPC has engineered a stronger economy than the USA. Sour grapes Mr. Laurent. China has absorbed the pollution and is now creating the world's greatest technological push for green energy. The Chinese people know the cost but they are patriotic and united for a win win future. There are problems in China but if you ask the Chinese people then the vast majority will tell you that they are satisfied and optimistic about their future. I have never seen such happy people as I see in China. First of all it has to be the world's safest place to be a citizen. Chinese people do not even carry money with them as their fintec is so superior to anywhere else that it is absolutely like going into a banana republic visiting the "western democracies". In fact you are lucky if you get a constant 4g signal in Canada and the USA. Truly it is the west that is declining and no amount of dribble quoting this and that study will replace the energy and optimism in China and Asia. Sure there are problems but with good governance there are also solutions. Every one of these China is failing predictions over the past ten years has been so wrong that it is laughable. Mr. Laurent you need to recalibrate your prejudices and open your mind to the fact that good governance is what is responsible for China's rise and good governance will be responsible for future stability. Don't look at the past too much because there is a great future for all nations. Your pessimism is really sad and I hope I have given you a reason to be happy. China is run by scientists and engineers whilst the USA is run by lawyers and celebrities. Over the years to come the incremental gains in ecology and happiness will be like the sun, rising in the east and setting in the west.

Very good article from the author. Topics well described and documented. In one decade, the Chinese moved from a "cycling" mean of transport to driving limousines and luxurious cars whilst the democratic western regimes, moved from driving locally produced luxury cars to using "bicycles" made in China!

'Rather than becoming more democratic, China became a pioneer of the kind of authoritarian neoliberalism now seen in Turkey, Brazil, Hungary, India, and elsewhere.'India has become much less authoritarian and more democratic since 1975. China is certainly a lot freer now than it was then. There is no 'authoritarian neoliberalism' in India. What exists, is Democracy under the Rule of Law. The Bench is no respecter of persons. If the P.M is shown to have broken the law, she will be sent to jail.

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